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What Spending on Golf versus Other Sports Says About Your Club’s Identity

AC_PLAIN

Dividing the Pie 
In the club world, much like in our private lives, the need for funds is often greater than the supply. As individuals, we prioritize competing interests on a regular basis—a new car, college tuition, family vacation, etc. For the club manager and board member, the struggle manifests itself in the budget process, where the true tribal nature of clubs comes to the surface. One group of members may be focused on golf while another contingent is keen on non-golf athletic amenities such as tennis, aquatics, fitness, squash, croquet, etc. Some golf-focused clubs may be feeling the pull to add non-golf facilities in order to re-connect with existing members or win over less golf-centric prospects.

While the money to build non-golf amenities (fitness centers, tennis courts, etc.) most often comes out of capital funding sources, sustaining the new amenity requires operational dollars from dues or other surplus generating departments. Simply building a tennis court or fitness center does not necessarily mean it will generate incremental operational funds, which raises an important question: "How much will it cost to operate the new facility and where will that money come from?"

Patterns in the Pie
The Available Cash Model (ACM) is a strategic framework for understanding a club’s proportionate sources and uses of cash. Early on in our study of industry data, it became clear that clubs typically spend about one-third of their Available Cash (think gross profit) on course maintenance. That number has proven consistent across the industry. Recently, another very interesting pattern has emerged from the data—a direct relationship between course maintenance spending and the spending for non-golf sports amenities.

Over the last 12 months, we’ve brought more than 150 new members on board in Club Benchmarking, a process which includes a one-on-one walkthrough to review and analyze their data. What we noticed was a marked consistency across the industry where the combined percentage of Available Cash going to course maintenance and the operation of non-golf amenities typically totals 40%. Golf-only clubs spent about 40% of their AC on the course and nothing on non-golf sports amenities, while clubs that have very significant non-golf sports/spa facilities are spending an average of about 15% on those facilities and 25% on the course. Within the spectrum, we find clubs allocating 30% course/10% non-golf, 36% course/4% non-golf, etc. This is one of the most clearly-defined patterns we have seen emerge from club industry data over the course of the last three years. The image below uses actual data from three different clubs to illustrate the remarkable consistency of the pattern.

course_maintenance_vs_other_sports_3_piesWalk the Talk
Does your club’s allocation of operational dollars align with its goals? Does your spending reflect that of a dedicated golf club, a diverse country club with a family focus, or some variation on those themes? There is no right and wrong here. Just the revelation that a club can instantly see and understand if its actual spending is in line with its stated strategy. If you claim to be a family-friendly club with amenities for the whole family and you are allocating 30% to the course and 10% to non-golf sports, you are staying pretty true to that objective in your proportionate spending. If the balance is 37% to course maintenance and 3% to non-golf sports, your spending is inconsistent with the family-friendly claim.  When it comes to facilities and club culture, you can't be all things to all people. You have to make a strategic decision about what kind of club you want to be and then target spending in a manner that supports those goals.

Additionally, with this new-found understanding, a club thinking about expanding its offerings can extrapolate and estimate the impact of those changes on their budgets and funding needs. Most often we see golf clubs attempting to build and offer non-golf activities. The net result could mean a reduction of course maintenance spending to support the new operations, or it could have no impact on the course budget if the new amenities succeed in attracting new members and the associated increase in dues revenue (resulting in more Available Cash).

Conclusion
The club business model is defined by the relative uses of operational funds. One of the relations made clear by actual industry data is that 40% of a club's Available Cash is allocated to the combination of course maintenance spending and non-golf sports spending. Understanding the direct connection between course maintenance spending and non-golf sports spending as it relates to the club’s strategic goals is pivotal for managers, boards and members. The AC Uses pie chart provides a graphic illustration of this relationship that can serve as a catalyst for meaningful discussions and help align disparate tribes (e.g. golfers vs. tennis players) around a common goal.

CB Member Note:
Login to your CB account and run the Available Cash report from the My Reports tab to check your Golf/Non-Golf spending pattern.